Governing Corporations with Concentrated Ownership Structure : An Empirical Analysis of Hedge Fund Activism in Italy and Germany, and Its Evolution

Against all odds, hedge fund activism occurs also in companies with concentrated ownership structure where the ultimate threat of a take-over has little chance to raise any concern among controlling shareholders.After summarizing the U.S. literature on the subject, this Article provides an in-depth description of hedge fund activism in Italy, and the plausible explanations for it based on the analysis of hand-collected data. The results are further tested through a comparison with hedge fund activism in Germany based on both legal and empirical analysis.While concluding that what apparently looks to be pure activism may in fact hide some form of relational investing to the benefit of hedge funds only, the Article also discusses the rationale and functioning of minimum board representation for minority shareholders through slate voting – a uniquely distinctive feature of the Italian corporate governance system that turns out to be a key-factor in future shareholder activism with the unprecedented increasing engagement of institutional investors.This article builds on an earlier and shorter paper - "Governing Corporations with Concentrated Ownership Structure: Can Hedge Fund Activism Play Any Role in Italy?" - which was presented at the 2009 Annual Conferences of the Canadian Law and Economics Association, University of Toronto, October 2-3, 2009, and of the Italian Society for Law and Economics, Università degli Studi di Firenze, December 4-5, 2009. This earlier paper is available at:'http://ssrn.com/abstract=1397562' http://ssrn.com/abstract=1397562